Exam 16: Income Taxes

Longhorn Corporation reported a loss for both financial reporting purposes and tax reporting purposes of $231,000 in 2014.For financial reporting purposes,Longhorn reported income before taxes for years 2011-2013 as listed below: Assuming Longhorn's tax rate is 30 percent in all periods,and that the company uses the carryback provisions,what amount should appear in Longhorn's statements for financial reporting purposes as a net loss in 2014?

Hagar Corporation reported depreciation of $250,000 on its 2014 tax return.However,in its 2014 income statement,Hagar reported depreciation of $100,000.The difference in depreciation is a temporary difference that will reverse over time.Assuming Hagar's tax rate is constant at 30 percent,what amount should be added to the deferred income tax liability in Hagar's December 31,2014,balance sheet?

Seymour Associates computed a pretax financial income of $280,000 for the first year of its operations ended December 31,2014.Included in financial income was $20,000 of nondeductible expense and $70,000 gross profit on installment sales that was deferred for tax purposes until the installments were collected. The temporary differences are expected to reverse in the following pattern. The enacted tax rates for this year and the next three years are as follows: (1)Prepare a schedule showing the reversal of the temporary differences and the computation of income taxes payable and deferred tax assets or liabilities as of December 31,2014. (2)Prepare journal entries to record income taxes payable and deferred income taxes. (3)Prepare the income statement for Seymour beginning with "Income from continuing operations before income taxes" for the year ended December 31,2014.

The application of SFAS No.109 results in the recording on the financial statements of an enterprise of deferred tax assets and liabilities.The initial identification of these deferred tax assets and liabilities raises the issue as to how these amounts should be shown on the balance sheet in terms of current and noncurrent classifications.One approach advocated by some in the profession is to classify all deferred taxes as noncurrent. Required: Explain the advantages and disadvantages of this approach and indicate if this approach is acceptable under SFAS No.109.

Ballantine Products,Inc.,reported an excess of warranty expense over warranty deductions of $72,000 for the year ended December 31,2014.This temporary difference will reverse in equal amounts over the years 2015 to 2017.The enacted tax rates are as follows: The reporting for this temporary difference at December 31,2014,would be a

Bodner Corporation's income statement for the year ended December 31,2014,shows pretax income of $1,000,000.The following items are treated differently on the tax return and in the accounting records: Assume that Bodner's tax rate for 2014 is 30 percent.What is the amount of income tax payable for 2014?

Omega Company reported net incomes in 2013 and 2014 before sustaining a significant operating loss in 2015.All of the 2015 loss can be carried back against the income of 2013 and 2014 for purposes of determining the company's 2015 income tax liability.How should the carryback be presented in the company's 2015 financial statements?